You are here

World maps versus market forces

World maps versus market forces

Cokie and Steven Roberts

The crisis in Ukraine highlights two truths about international politics: Some things have not changed since the end of the Cold War. And some things have changed a lot.

What remains is the map. Ukraine still sits on Russia’s western border; the name “Ukraine” means “borderland” in Slavic, and the area was once known as “Little Russia.” With the rapid expansion of NATO eastward, Ukraine is one of only two countries (Belarus is the other) that provide a buffer between Russia and Western allies like Poland and Hungary.

That gives Russia’s czarlike leader, Vladimir Putin, large and legitimate interests in who rules that country. As Charles King, a Russian expert at Georgetown, wrote in the New York Times, “Some things are not wrong just because Russians happen to believe them.”

But geography is not as important as it once was. In a world of global markets operating in cyberspace, capital flows across boundaries as easily as water. Russia is far more connected to international commerce than it was before the Berlin Wall collapsed and that makes Moscow — and Putin — more vulnerable to economic pressures.

“What we see here are distinctly 19th- and 20th-century decisions made by President Putin to address problems,” one administration official told the Times. “What he needs to understand is that in terms of his economy, he lives in the 21st-century world, an interdependent world.”

All true. Yet geography has not yielded completely to globalization. One in five Ukranians speaks Russian and identifies strongly with Moscow. Putin’s argument that he was sending in troops to protect them was a fraud; there was no evidence that any ethnic Russians were in danger. But they remain a key factor in the geopolitical balance.

So does the historic ambition of Slavic people in Northern Europe to control warm-water, all-season ports. The Russian Black Sea fleet, based in Ukraine’s Crimean region, has a direct route to the Mediterranean via the Bosphorus, the strait that runs through Turkey.

We lived in that region for almost four years. We watched countless Russian vessels sail through that passage, and the scene leaves an indelible lesson: Russia would do almost anything to protect its naval power. That’s why Putin’s troops occupy the Crimean peninsula.

The Russian leader is learning, however, that soldiers cannot control markets. Traders back in Moscow did some marching of their own — away from assets and investments that could be jeopardized by the turmoil Putin triggered.

Russia’s currency, the ruble, plunged to all-time lows against the dollar and the euro, forcing Moscow to raise interest rates dramatically and pour cash into currency markets to counteract the selloff.

The Moscow stock market fell sharply, and Reuters reports that the leading losers “were the many companies, from banks to retailers, with heavy sales exposure to Russia and Ukraine.” The markets bounced back a bit after their initial panic, but the point had been made.

Andrei Kuznetsov, a Russian banking strategist, told the news agency that about 70 percent of the stock shares traded in Moscow are controlled by foreigners. And close to half of those foreigners are American.

“The Russian market has always been dependent on foreign investors,” he noted, and they have many other places to put their money. In fact, currency exchange shops in Moscow were so swamped by skittish investors wanting to trade rubles for dollars that they ran out of greenbacks.

In delivering a forceful warning on NBC’s “Meet the Press,” Secretary of State John Kerry pinpointed Moscow’s economic exposure: “Russia has major investment and trade needs and desires. I think there’s a unified view by all of the foreign ministers I talked with yesterday … that they’re simply going to isolate Russia, that they’re not going to engage with Russia in a normal, business-as-usual manner, that Russia is inviting opprobrium on the international stage.”

Trade works both ways, of course. Europe gets about one-third of its natural gas from Russia and some countries, especially Germany, are reluctant to turn the screws too tightly. But the markets are under no such constraints.

“Putin may be finding that his actions have costs,” wrote Jason Karaian on the economic website Quartz. “Not the costs that world leaders threaten to impose in vague communiques, but the pain that results from thousands of nameless, faceless transactions in stock, bond and currency markets as investors flee the uncertainty and instability sown by Moscow’s own unpredictable intentions in Ukraine.”

Maps matter. So do markets. The tension between them will help determine Ukraine’s future.

Rules for posting comments

Comments posted below are from readers. In no way do they represent the view of Stephens Media LLC or this newspaper. This is a public forum.

Comments may be monitored for inappropriate content but the newspaper is under no obligation to do so. Comment posters are solely responsible under the Communications Decency Act for comments posted on this Web site. Stephens Media LLC is not liable for messages from third parties.

IP and email addresses of persons who post are not treated as confidential records and will be disclosed in response to valid legal process.

Do not post:

Potentially libelous statements or damaging innuendo.

Obscene, explicit, or racist language.

Copyrighted materials of any sort without the express permission of the copyright holder.

Personal attacks, insults or threats.

The use of another person's real name to disguise your identity.

Comments unrelated to the story.

If you believe that a commenter has not followed these guidelines, please click the FLAG icon below the comment.